In my role as an American token founder and advisor, I hear about different ways to “do a compliant ICO” each week. Each seemingly has its moment in the sun before a major law firm or regulator shoots it down — I’m looking at you, SAFT agreement — as the broader market waits for a new asset classification or legal clarification.

One seems to have made its way to the forefront, and it appears to have some staying power: the Private Placement Memorandum. In other words, meet the new boss, same as the old boss.

(Disclosure: I’m not a lawyer or legal expert of any kind. None of this is legal advice — it is only the observation and opinion of a cryptocurrency market participant.)

You might not agree the Private Placement Memorandum (PPM) should be considered an “ICO alternative.”

I hear you.

The PPM is, after all, a sale of equity. You’re welcoming individual investors to your capitalization table just the same way you would following a traditional startup financing path.

But there are two major benefits of running a crypto-token project fundraise with a PPM:

There’s no ambiguity here. We know how a PPM works from a legal perspective. A PPM generally does not touch the SEC (unless the company chooses to).

The PPM agreement can establish future rules. Filecoin’s PPM states you can earn a discount on the purchase price of your crypto-token if you agree to a longer vesting period. Others offer liquidation preferences or guarantees.

Many crypto-token project PPM sales, like EasyTutor and 27v, leverage that second bullet in a way ICO folks should dig: if/when the U.S. government gets around to establishing some rules, an individual investor may convert their equity investment to project token.

This is especially true when a PPM is paired with a SAFT agreement, like with Filecoin. (And may not be true if the PPM offer is paired with certain SEC filings — do your diligence.)

At such a time, the investor would have the option to realize the benefits of a crypto-token utility (if applicable) and/or converting to a tradable and liquid investment asset.

In the end, an investor is able to jump in on the next great blockchain project, resting assured their project is on solid legal ground and that they have a real stake in the outcome of the business, while (perhaps) holding the right to convert that investment to crypto-token at a later date. That’s a great position for those who want to get into blockchain or crypto but are more risk-averse.

This option is not without downside, namely that PPMs run counter to the general spirit of a crowd sale as they can only be offered to a targeted group of accredited investors and they should not be broadly marketed to the public.

The fact remains that such a structure is, as of today, the only option I’ve heard lawyers accept as viable and compliant without reservation.